Been a while since I've been involved with the charging of sales tax, but I believe Ohio requires sales tax to be charged if the labor is part of a service-oriented sale.The state of Minnesota where I live and have my own business is considering a sales tax of 5.5%on the labor we perform. Does anyone else have a tax on the labor performed?
That is correct for NJ. In addition, I just found out something else at a Chamber of Commerce meeting this week that I wasn't aware of. I've been buying material at the supply house, paying sales tax on it and then marking it up and selling it to my customers. Pretty normal operation I would say. When I do any work that would be considered a capital improvement I have the customer sign a NJ-ST-8 form and I don't charge any tax on anything. When I perform a service call (like replacing a burnt receptacle) I charge for the material at the marked up rate and my labor which is then taxed at 7%. Now, the accountants at this meeting tell me if you itemize your bill you're supposed to recharge sales tax on the material you sell as well as the labor. Seems like double taxation to me. So, I guess if you quote someone a price for work and it's one price for labor and material you don't have to charge sales tax. Someone correct me if I'm wrong.In NJ labor is subject to sales tax. 7%, just like everything else.
I don't know how NJ sales tax works. Heck, it's been so long since I've had an Ohio vendor license, I may not know how Ohio's sales tax works!!! But as I recall, I had to charge sales tax on the total amount of service fees... i.e. labor and material, regardless whether it was itemized or not. However, as a vendor I was tax exempt on any material purchased that I would sell retail, i.e. wholesale purchasing, and had to submit a tax exempt form to wholesaler. For items I purchased retail (paid sales tax) and sold retail (charged sales tax), I could reduce my sales tax liability by the amount of sales tax I already paid, i.e. remit only the difference.... Now, the accountants at this meeting tell me if you itemize your bill you're supposed to recharge sales tax on the material you sell as well as the labor. Seems like double taxation to me. ...
That sounds good to me , you just add the sales tax on to the grand total.That is correct for NJ. In addition, I just found out something else at a Chamber of Commerce meeting this week that I wasn't aware of. I've been buying material at the supply house, paying sales tax on it and then marking it up and selling it to my customers. Pretty normal operation I would say. When I do any work that would be considered a capital improvement I have the customer sign a NJ-ST-8 form and I don't charge any tax on anything. When I perform a service call (like replacing a burnt receptacle) I charge for the material at the marked up rate and my labor which is then taxed at 7%. Now, the accountants at this meeting tell me if you itemize your bill you're supposed to recharge sales tax on the material you sell as well as the labor. Seems like double taxation to me. So, I guess if you quote someone a price for work and it's one price for labor and material you don't have to charge sales tax. Someone correct me if I'm wrong.
That is double taxation. So if you are charging the end-user taxes, then you are supposed to be purchasing the materials tax-exempt from your supplier.Now, the accountants at this meeting tell me if you itemize your bill you're supposed to recharge sales tax on the material you sell as well as the labor. Seems like double taxation to me.
I don't know how NJ sales tax works. Heck, it's been so long since I've had an Ohio vendor license, I may not know how Ohio's sales tax works!!! But as I recall, I had to charge sales tax on the total amount of service fees... i.e. labor and material, regardless whether it was itemized or not. However, as a vendor I was tax exempt on any material purchased that I would sell retail, i.e. wholesale purchasing, and had to submit a tax exempt form to wholesaler. For items I purchased retail (paid sales tax) and sold retail (charged sales tax), I could reduce my sales tax liability by the amount of sales tax I already paid, i.e. remit only the difference.
What it amounts to is, you have sales tax liability on your markup.
I'm not sure if this is of any value to anyone but this is a copy of a NJ ST-8 capital improvement form. On the second page it explains what types of installations sre exempt from taxes and which are taxable.
http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st8.pdf
You are correct. I make the determination at the time I install new materials as to whether it's taxable or not. If I get audited I would be required to make a case as to why I didn't charge sales tax. Granted, a lot of gray areas.I did not read it thouroughly, but it looks like you are supposed to collect and remit sales tax in general, if the project is a capital improvement the owner can option to not pay sales tax by filling out this form and giving it to the contractor. Without the form you are still supposed to collect tax as usual. Kind of similar thing that happens (I would guess in most areas) where you make a sale to a tax exempt organization like churches or schools, government agency including cities and villages, etc. If you don't have properly filled out exemption forms on file you are supposed to charge them sales tax.
On the back page they give you examples of what types of things are taxable. I actually went to the State tas office and that's the way it was explained to me.That form does not mention just exactly what items are taxable (including possibly labor charges), just what circumstances they are not taxable in a capital improvement project.
You are correct. I make the determination at the time I install new materials as to whether it's taxable or not. If I get audited I would be required to make a case as to why I didn't charge sales tax. Granted, a lot of gray areas.
On the back page they give you examples of what types of things are taxable. I actually went to the State tas office and that's the way it was explained to me.
We also haver the following forms that are used :
NJ-ST-3 is a Resale Certificate. This would be issued to my supplier if I were say a wholesaler that was buying finished goods for sale to the public -
http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st3.pdf
You could see how this could become a PITA if I had to do this for every time I went to the supply house and for every customer I do work for
NJ-ST-13 is a contractors exempt purchase certificate that I issue to my supplier when doing business for a tax exempt organization -
http://www.state.nj.us/treasury/taxation/pdf/other_forms/sales/st13.pdf
That is correct for NJ. In addition, I just found out something else at a Chamber of Commerce meeting this week that I wasn't aware of. I've been buying material at the supply house, paying sales tax on it and then marking it up and selling it to my customers. Pretty normal operation I would say. When I do any work that would be considered a capital improvement I have the customer sign a NJ-ST-8 form and I don't charge any tax on anything. When I perform a service call (like replacing a burnt receptacle) I charge for the material at the marked up rate and my labor which is then taxed at 7%. Now, the accountants at this meeting tell me if you itemize your bill you're supposed to recharge sales tax on the material you sell as well as the labor. Seems like double taxation to me. So, I guess if you quote someone a price for work and it's one price for labor and material you don't have to charge sales tax. Someone correct me if I'm wrong.
The state of Minnesota where I live and have my own business is considering a sales tax of 5.5%on the labor we perform. Does anyone else have a tax on the labor performed?
I agree and understand. But, I can't imagine why someone would buy something for a dollar and sell it for a dollar. The cost of material becomes more than you think when you have to drive to the supply house on your time and use your gasGoldstar,
In NJ, the direct pass through of material costs is not subject to sales tax. Meaning if you sell the material at cost (including the sales tax you already paid), you do not charge additional sales tax. If you mark up the material then it is subject to taxation. In actually, just the mark-up is taxed, but that's cumbersome to figure plus your customer would be able to calculate how much profit you're making on the material you sold to him.
I'm not sure I agree with that.If you charge one price that includes labor and material combined the entire amount is taxed.
You may have the right idea.I have seen invoices with a separate line for materials that just says "Materials", and then no charge for sales tax. I guess if you were to be audited you could easily produce some receipts to match the amount charged and convince the auditor that it was just a direct pass through of costs. I charge sales tax on everything, except for capital improvement/new construction.
8.125% here